Aenert news. Energy Companies
Wind power is one of the key areas of renewable energy, which is the main hope in the efforts to counteract climate change. This predetermines considerable interest in the current state of this industry. Recently, the wind energy industry has faced a number of logistical, technological and financial difficulties, which have had a noticeable impact on production performance.
Since 2021, wind power has lost its role as the global leader in renewable energy, excluding hydropower, in terms of installed capacity, giving way to solar photovoltaics. This trend accelerated in 2022. According to Irena, the total capacity of wind turbines worldwide was slightly less than 900 GW, while the total capacity of solar converters exceeded 1,000 GW. Between 2013 and 2022, wind power capacity tripled, while for solar photovoltaics the growth was more than 7.5 times. Over the past three years, the growth rate of wind power has declined noticeably, amounting to about 9% in 2022. Perceptible decline occurred in the U.S., where the growth in 2022 was only about 6% (for comparison, in China – 11.2%, in Europe – 8.4%).
By the beginning of 2023, the main capacities of wind generators were concentrated in the three largest economic regions - China (40.7%), Europe (26.8%) and USA (15.7%). Thus, they account for more than 83% of all installed capacity in the world. The most dynamic development of wind power engineering took place in China, where more than 300 GW of wind turbines were installed within the last ten years, including a record-breaking 72.5 GW in 2020. However, even here the growth rate slowed down significantly from almost 35% in 2020 to 11% in 2022.
Wind turbines Goldwind, China
The offshore wind energy market looks more optimistic, with its share of the total volume growing to 7% in 2022 compared to 2.4% in 2013. Here, Europe (48.5% share in the global offshore energy sector) and China (48.2%) are leading with a resounding margin. At the same time, China installed 24.5 GW during 2020-2022, while Europe installed only 8.7GW (of which Germany 0.57GW and the UK about 4 GW).
In 2022, significant changes also took place in the ranking of the largest wind turbine manufacturers. Despite contradictory data from different sources, many of them gave the lead to China's Goldwind. Vestas and GE Renewable were also placed in the top three. According to BNEF, the top ten manufacturers for 2022 include six Chinese manufacturers, including Goldwind, as well as SiemensGamesa and NordexAcciona in addition to the above-mentioned companies.
Below we offer a brief analysis of the production performance of current industry leaders Goldwind, Vestas and GE Renewable for the first quarter of 2023 compared to prior periods.
Goldwind is a leading Chinese manufacturer of wind turbines. In April 2023 the total installed capacity of wind turbines of the company reached 100 GW, and its share in the global installed capacity exceeded 11%. The company operates in 38 countries, but its main market remains China, where it has been the leader for at least the last ten years.
Goldwind's performance in the previous years has been steady, with the company achieving record sales of nearly 14 GW in 2022. In 2022Q4, the company achieved record quarterly revenue of more than 20,000 million yuan, an increase of more than 18% over the same quarter in 2021.
Goldwind, Revenue, net income and share price
Overall, the profile of quarterly earnings over the past three years has shown the same pattern over the years, marked by lows in the first quarter and highs in the fourth. Net Profit Attributable to Owners, which declined significantly in 2022Q4 was largely offset in the first quarter of 2023.
Nevertheless, the considerable decline in profit margin from 15.4% in 2021Q4 to 11.7% in 2022Q4 is remarkable, as well as a significant decrease in the stock price of the company's shares relative to peak values in 2021. Wind Turbine Manufacturing & Sales accounted for more than 70% of the company's 2022 revenues, with Wind Farm Development contributing 15% and Wind Power Service 12.2%. In October 2022, Goldwind in partnership with China Three Gorges (CTG) unveiled a new 13.6 MW offshore turbine with a rotor diameter of 252 meters. The turbine design uses direct drive technology and permanent magnet generators. This turbine, along with the earlier GWH221-8.X-10 and GWH24X-12.X turbines, will obviously expand the company's product range in the high power turbine sector. In addition, at the end of 2022 there were reports of Goldwind and CTG building a 16 MW turbine, which appears to be a world record holder. In this context it is worth mentioning that the company's intellectual assets include 6,500+ domestic and foreign patent applications and 4,300 authorized patents.
Danish Vestas is by far the most well-known brand in wind power. At the end of the first quarter of 2023, the company had installed 166 GW of wind turbine capacity worldwide, or more than 18%, including more than 8 GW offshore. The largest numbers were installed in the U.S. (more than 24%) and Germany (more than 10%). Another 146 GW wind turbines are under service. Vestas' global network covers 87 countries and is constantly expanding.
2022 was a highly unsuccessful year for the company. Order intake in 2022 was 11.2 GW, representing 80% of orders in 2021 and 65% compared to 2020. Revenue for 2022 reached 14.5 billion euro, 7% lower than in 2021. Operating profit (EBIT) before special items in 2022 was a record and very unpleasant 1 152 million euros with a negative sign and Net Profit for the year went down to more than a billion and a half euros.
Vestas. Revenue, net income and share price
The company's press releases attributed the situation to geopolitical tensions and supply chain disruptions, rising production costs, inflationary processes, and uncertainty about the extension of tax incentives. Other issues cited were organizational, related to slow permitting processes in Europe, and technical, which include impairment on its V174 offshore unit, and political, in the form of reduced business activity in the US due to the Inflation Reduction Act and the upcoming presidential election in 2024.
In the first quarter of 2023, the company showed long-awaited signs of recovery. Firstly, quarterly revenues rose significantly to 2.8 billion euros, which is almost 14% higher than a year earlier, even if this is largely due to rising service costs. Secondly, Operating Profit (EBIT) and Net Profit, although small, were positive. Finally, quarterly order intake reached 3.3 GW, returning to the level of the relatively favorable 2020. In addition, Vestas has a solid capital structure, which will be further supported by bond issues and credit facilities totaling more than one billion euros. The company predicts that after a recovery year of 2023, next year will be a year of sharp growth.
A special hallmark of Vestas has always been the wide range and flexibility of its product range, which includes a variety of turbines from 2 to 10 MW. The most recognized among them are V90-1.8/2.0 MW, V110-2.0 MW, V150-4.2 MW, V136-3.45 MW turbines. The V164-10 MW turbine and the latest V236-15.0 MW™ offshore turbine are to support this trend. It has a blade length of 115.5 meters, a working area of 43,742 m2, but most importantly it will provide a capacity factor of more than 60%. At the end of last year the turbine was placed at the Danish Østerild National test center for full validation. It is expected that it can enter the market at the end of 2023. This turbine will have to compete with similar turbines, including the aforementioned 16 MW Goldwind and CTG design turbine, the 2019 Haliade-X wind turbine, the 12 MW+ manufactured by GE Renewable Energy and the expected 2024 Siemens Gamesa turbines – SG 14-236 DD and SG 14-222 DD.
GE renewable energy
General Electric Company (GE) is among the world's largest corporations and operates in several industries, including renewable energy. Its divisions include Aerospace, including Commercial Engines and Military Engines, Renewable Energy and Power. GE Renewable Energy has more than 40,000 employees in more than 80 countries and is one of the world leaders in wind energy. The total number of onshore wind turbines alone exceeds 54,000 units. Over the past three years the volume of confirmed orders for GE Renewable Energy wind turbines was about 30 GW.
GE Renewable Energy showed disappointing results in 2022. Revenues (GAAP) were about $13 billion, or 17% less than in 2021. Annual Loss reached $2.240 billion, nearly tripling the previous year's loss, Profit Margin was fixed at 17.3% versus 5.1% in 2021. Wind turbine sales fell to 7.5 GW, down from 11.7 GW in the previous year.
GE Renewable Energy. Revenue, net income and share price
For the fourth year in a row, the company has been in the loss zone, with increasing volumes of losses. The first quarter of this year was no exception to this negative trend. Revenues fell by one percent from 2022Q1, and the quarterly loss amounted to $414 million. The main income was received from sales in the onshore wind sector, with 405 wind turbines sold (502 in 2022Q1) with a total capacity of 1.5 GW. It should be noted that the share price curve shown in the chart above refers to the entire GE corporation, with the Power and especially Aerospace divisions showing strong earnings growth in 2023Q1 compared to 2022Q1, as in fact for the entire year 2022.
GE's 2022 report documents note that "… We experienced inflationary pressures not seen since the 1980s, geopolitical conflict, global supply chain challenges, and an enduring pandemic.” GE Renewable Energy's bottom line is also reported to have been significantly impacted by reduced wind turbine deliveries primarily for Onshore Wind, customer delays and deferrals due to uncertain U.S. tax policies, rising costs across all divisions and higher commissioning costs in the offshore wind industry.
In December 2022, GE Renewable Energy announced that it had received a full type certificate for operations up to 14.7 MW for its flagship Haliade-X turbine. The first version of this 12 MW turbine began operating back in late 2019 and was the first in this market segment, well ahead of the competitors. Certainly the addition of the company's turbine roster can help expand markets and level out GE Renewable Energy's financial performance.
Summing up the results of the leading global companies in the field of wind energy, it is necessary to mention Siemens Gamesa Renewable Energy (SGRE), which despite the loss of some of the leading positions, still remains among the global top players. Suffice it to say that the cumulative amount of installed offshore capacity of the company exceeds 21 GW, which is an absolute world record. The company's turbine supply ranges from 1.7 to 12 MW. Next year the new flagship offshore turbines SG 14-236 DD and SG 14-222 DD are expected to hit the market.
However, despite the company's impressive presence on the world market, its financial performance in recent years has left much to be desired. For several years SGRE has been in the loss zone, with no signs of progress. While SGRE's EBIT was - €942 million in the fiscal year ended (09.2021-09.2022), it was - €522 million a year earlier. The volume of orders is also decreasing noticeably year on year. A year ago it was 1,679 MW and in the year ended it was only 7,652 MW, with a decrease for both offshore and onshore turbines. The company's EBIT dipped to a no-nonsense - €878 million in the last reported quarter. Perhaps the consolidation of a 97.59% stake in SGRE in the hands of parent company Siemens Energy, as well as a significant amount of leverage will help turn around the financial situation. However, it is alarming that among the reasons for the deplorable financial state of SGRE are mentioned, for example, quality problems, a growing number of technical equipment failures, and execution of outdated and burdensome onshore projects. In this connection, it is obvious that a radical transformation of the company's business will require comprehensive solutions, both organizational and financial as well as technological.
Based on the above facts, one can make the definitive conclusion that the situation in the field of global wind energy is not simple. More difficult to find a definitive answer to the main question: What are the reasons for this development? There are several possible answers:
- Wind power, as a large-scale investment project, has a lot of negative aspects, which deter potential investors, while other competitive areas of energy have become more attractive. Specific examples here could be the great popularity of solar energy, difficulties with obtaining permits, legislative uncertainty regarding tax and other types of incentives;
- Production of wind turbines in different regions to a large extent depends on local characteristics, including the resource base, the level of wages and social payments, the degree of state support, etc., which leads to the formation of unequal costs from region to region and, consequently, to different financial results, which becomes especially noticeable in a saturated market;
- The time has objectively come for the industry to change leaders both regionally and in terms of specific participants, which leads to the financial instability of individual companies. It should be recognized that this is an inevitable and natural process that forms the basis of competitive business;
- The wind energy industry has for many years had a number of unresolved technological problems, mainly related to a low capacity factor and the lack of adequate solutions for energy storage. So far, progress in this area takes the shape of increasing the geometric parameters of wind turbines and increasing the share of offshore wind farms. However, this is inevitably followed by an increase in capital and operating costs, and offshore development is also limited by natural factors;
- The world economy is showing signs of recession, and wind power, as one of the most sensitive energy industries, adequately responds to this process by a decrease in demand.
The above list certainly does not exhaust all the causes of the crisis phenomena. Moreover, there is implicitly their unequal interpenetration and synergy of the total impact in each case, which makes it difficult to analyze objectively. However, in our opinion, it is too early to speak about the full-scale crisis of the branch, though it is impossible to deny the existence of negative tendencies. Apparently, the next two years will be decisive for understanding the direction and projected level of development of wind energy, as well as the world energy sector as a whole.
By the Editorial Board